It’s Official. 8(a)s can have another year.

The year 2020 was such a disaster that the federal government is giving some businesses what amounts to a do-over.

Despite a veto and—gestures generally everywhere—other challenges, the SBA is publishing a final rule on Wednesday, January 13, that allows current 8(a) participants to elect to extend their participation in the program by another year, effective immediately.

This change impacts a lot of businesses. The SBA estimates that over 4,000 firms will be eligible to take advantage of the extra year.

Of course, it wouldn’t be the government without a curve ball thrown, but we’ll get to that shortly. The final rule relies on the 2021 National Defense Authorization Act (“NDAA”), which the president vetoed forcing Congress to override the veto last week, and the Consolidated Appropriations Act, the combined COVID-19 stimulus bill and the spending bill that prevented a government shutdown.

Remember that? It was less than three weeks ago, if you can believe it.

As we’ve said before, this is a dramatic departure from the government’s strict rule that the 8(a) program lasts for nine years—and only nine years.

What’s the catch?

If there is one, we haven’t found it yet. According to the new rule, the 10th year is tacked on automatically unless a company expressly opts out in writing. Even recent graduates can write to the SBA for inclusion back in to the program. They just have to certify that they still meet the program requirements. In fact, even firms that chose to pause their participation in the 8(a) program because of COVID-19 get a 10th year.

We noted previously that the extension might adversely impact participants’ business development targets. If so, that would have been a small price to pay for an extra year of the program. But that is not a problem anyway. The final rule explains that “the 50 percent business activity target that applies to program year nine will also apply to the extended program term.” So long as the firm meets the target of 50 percent of business coming from outside of the program, or made good faith efforts to obtain that work, it will still be eligible for 8(a) sole source awards during its extra year.

You might remember that I mentioned a curve ball. It seems that the SBA has taken some exception to the statute. Both the Appropriations Act and the NDAA instruct the SBA to authorize an extension for 8(a) firms participating “on or before September 9, 2020.”

But, in a case of stunning bureaucracity—a word I’ve just made up—the SBA said that it didn’t know what “before” means. According to the SBA, “[t]here is no further clarifying language as to what ‘before’ September 9, 2020 is intended to encompass.”

So, it decided, on no known authority, that before September 9, 2020, meant March 13, 2020, the day that COVID-19 was declared a national disaster. Seriously.

It is SBA’s understanding that Congress extended the term of participation in the 8(a) BD program because it believed that the pandemic has adversely affected 8(a) concerns and their ability to participate in and receive the full benefits of the program.

Thus, SBA believes it is reasonable to conclude that any firms participating in the program as of the date the national disaster was declared due to the pandemic (i.e., March 13, 2020) should receive the program term extension authorized by Congress.

Extension of Participation in 8(a) Business Development Program

Call me old fashioned, but I always felt on or before September 9 meant on or before September 9. But to the SBA, it apparently means that if you got in after March 13, 2020, you don’t get an extra year.

This six-month difference may not have a ton of practical impact, but let’s just say you’re a company that got in to the program on April 1, 2020. According to Congress, you get to be in the program for 10 years. According to the SBA, it’s nine. That’s a pretty big difference considering the advantages available in the program.

It’s reasonable to expect this difference of opinion will impact at least a handful of businesses and it’s also reasonable to expect those businesses will want their 10th year. We’ll be sure to keep an eye on it.

In the meantime, if you have questions about these changes or other issues related to small business federal contracting, please give us a call.